Making the Business Case for Sustainable Design

July 28, 2004

Are the additional up-front costs—"first costs"—of an investment in sustainable buildings a sound investment of public dollars? In FEMP's recently published Business Case for Sustainable Design in Federal Facilities, Beverly Dyer and Anne Sprunt Crawley of DOE set out to answer that question.

The report provides significant financial evidence, from research findings and case studies, that sustainable design is a smart business choice. Both the 20-page brochure and the longer resource document show that sustainable design does not have to significantly increase first costs.

For the study, FEMP developed two detailed energy models for a prototype 20,000-square-foot building and compared a codecompliant (ASHRAE 90.1-1999) reference building with one having an integrated package of sustainable features. The analysis showed that the sustainable building used 37 percent less energy,
and additional first costs were only between 0 and 2 percent. The simple payback for the sustainability measures was 8.7 years; lifecycle cost savings over 25 years were $23,000. (See this report on the Web).

Another report released in 2003, The Cost and Financial Benefits of Green Buildings, by Greg Kats, used a different method to draw similar conclusions. Kats studied the costs and benefits of 40 California buildings. He found that the added premium for sustainable design ranged from 0 to 2 percent, as in The Business Case, and average energy savings were about 30 percent.

This report points out that additional up-front investment of less than 2 percent in construction costs yields life-cycle cost savings of more than 10 times the initial investment. This report, as well as the FEMP report, includes a broad survey of the literature about quantifying the value of energy and water savings, reduced emissions, waste reductions, higher productivity, and greater health.

Although the many benefits of sustainable buildings can be shown in data, as these reports show, they acknowledge that some issues are still difficult to quantify, such as the correlation between better interior environments and improvements in the performance of both workers and businesses. But stay tuned;
FEMP and others in the public and private sectors will continue to pursue answers to these questions.

"We at the Department of Energy believe that there can be a sound business case for the use of sustainable design options, and we encourage all federal agencies to incorporate these options whenever possible."